Analysis of labor market and economic growth in South Sulawesi province

Abstract

South Sulawesi province has relativity high economic growth, but it also has high level of unemployment. The study generally aims to analyze sources of economic growth, including total factor productivity (TFP) and the effect toward the performance of labor market in South Sulawesi. TFP is counted by indirect accounting method. The performance of labor market is analyzed by using simultaneous equation model, while wage rigidity indicator is assessed by using an equation of error correction model (ECM). The result of analysis indicated that, from supply side, TFP has given the highest contribution toward economic growth of South Sulawesi (2.09%) and labor has given the lowest contribution (1.70%). The high contribution of TFP is mainly in industrial sector (4.20%), while contribution of TFP in agricultural sector decreased, specially, since monetary crisis, with the average contribution -1.02%. TFP in urban industrial sector significantly reduced job opportunity, while in agricultural sector and in rural industrial sector significantly supporting enlarged job opportunity. Furthermore, sources of economic growth from demand side were only investment and export significantly and consistently increased sectoral job opportunity. The wage is generally rigid, specially, in industrial sector.